Eskom heading for a meltdown

456-an Eskom tower collapsed in Slovoville, Soweto, due to the theft of structural components of the towers.
29.07.2014
Picture:Dumisani Dube

Johannesburg - Eskom has one month to come up with a plan that makes “logical sense” that addresses its cash-flow problems and energy security.

The parastatal - which is in danger of collapsing and which announced on Tuesday that it had lost almost R6 billion in revenue - was told by Public Enterprises Minister Lynne Brown that it had until the beginning of September to get its act together.

Eskom painted a bleak picture on Tuesday at the joint energy and public enterprises committee meeting of the various challenges plaguing it - from underinvestment, ageing power plants, threats of further ratings downgrades, continued load shedding and an ever-increasing municipal debt.

Brown told the meeting that a draft report with options had been shared with the cabinet.

“We are going to be receiving the final proposal soon, after which we will take this to cabinet sub-committee and cabinet - ideally before the end of September.”

In light of the various challenges, the minister said President Jacob Zuma had tasked members of the energy security cabinet sub-committee to look at these matters, among others.

“An intergovernmental task team comprising my department, the Department of Energy and the National Treasury have been working with Eskom and the regulator to formulate a solution to the immediate challenges that Eskom is facing.”

Brown said the new permanent chief executive of Eskom would be appointed within weeks.

She also told the committees that she was confident the delayed Medupi power plant would be completed by December.

Eskom financial director Tsholofelo Molefe said the power utility was faced with the dilemma of balancing financial sustainability and operational sustainability to make sure it ensured security of supply as well as delivering on its capital-expansion programme.

“Our challenges regarding the financial sustainability really emanate from the multi-year price determination (tarrifs), which was lower than what we expected, but also as well as declining volume that we have seen.”

She said Eskom had lost close to 9 000 gigawatt hours, which translates to about R5.8bn of revenue. Eskom was “highly dependent” on borrowing and also ran the risk of a further ratings downgrade, which meant the company would pay more interest when borrowing money, said Molefe.

Acting chief executive Collin Matjila said another challenge was that of ageing infrastructure.

“The ages of our generation fleet - 60 percent of our power stations are older than the recommended design life of 30 years, and you’ll see in groupings under coal 3 that those are way beyond their life cycle. Only three power stations under coal one are below the 30 years’ design life.”

Issues that arose from this reality were that there was an increase in “unplanned failures” of the units.

“Load shedding remains a risk we are going to have to live with,” he told the committee.

Board chairman Zola Tsotsi said that as a public company, Eskom belonged to the people.

However, it had got to a point that the reserve margin “was so low that the power system became constrained by the time we began a new build programme”.

“Municipal debt has also had an impact on our cash flow.”

Energy committee chairman Fikile Majola said the two committees would be collaborating and working closely with the departments of energy and public enterprises “on issues relating to energy in general, and electricity in particular”.